Consider the following information: Calculate the expected return for each stock

Question

Consider the following information:

  

  

Calculate the expected return for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  

Calculate the standard deviation for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

Rate of Return If State Occurs   State of Probability of   Economy State of Economy Stock A Stock B   Recession .15 .06 .19   Normal .60 .09 .10   Boom .25 .14 .27

Explanation / Answer

1)

Thus, the expected rate of return is 9.8%.

Thus,the rate of return is 9.9%

Expected return on stock A: State of economy Probability Rate of return Expected rate of return Recession 0.15 0.06 0.009 Normal 0.6 0.09 0.054 Boom 0.25 0.14 0.035 0.098

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